21st Century Business Herald reporter Pao Yifei reports from Beijing
After a brief uptrend, the manufacturing PMI fell below the line of prosperity and decline again in July.
On July 31, data from the National Bureau of Statistics showed that the manufacturing Purchasing Managers Index (PMI) in July was 49.0%, down 1.2 percentage points from the previous month, below the threshold, and the level of manufacturing prosperity declined. From the perspective of sub-indices, among the five sub-indices that constitute the manufacturing PMI, only the supplier delivery time index is higher than the critical point, and the production index, new order index, raw material inventory index and employee index are all lower than the critical point.
According to the analysis of the interviewed experts, the endogenous downward pressure is currently relatively large. The decline of PMI in July was mainly affected by factors such as the traditional production off-season under high temperature weather, insufficient release of market demand, and the decline in the prosperity of high-energy-consuming industries. After the rapid release of the month, it has declined. At present, it is necessary to focus on the problem of insufficient market demand and prevent the impact of external market risks.
Insufficient demand is the main difficulty
Zhang Liqun, a special analyst of the China Federation of Logistics and Purchasing, believes that the PMI index in July turned from rising to falling, and returned to below the line of prosperity and decline, indicating that the endogenous downward pressure is great. On the one hand, efforts to fully control the impact of the epidemic and focus on coping with the triple pressure are improving the production and operation conditions of enterprises; on the other hand, the impact of the epidemic is still on the rise, and problems such as shrinking demand have accumulated for a long time, and multiple difficulties have been long. Time continues and stacks up, leaving more and more businesses in trouble. The two types of factors are mutually ups and downs, and the number of companies getting out of the predicament is gradually increasing, which is expected to take time.
Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics, believes that insufficient market demand is the main difficulty facing manufacturing companies at present. In July, the supply and demand of the manufacturing industry declined after the rapid release in June. The production index and new order index were 49.8% and 48.5% respectively, down 3.0 and 1.9 percentage points from the previous month, both in the contraction range.
According to the survey results of the China Association of Logistics and Purchasing, the proportion of enterprises reflecting insufficient market demand has increased for four consecutive months. In July, the proportion has exceeded 52%, hitting a new high since 2021. The foundation for the recovery of manufacturing development still needs to be consolidated.
According to data from the National Bureau of Statistics, 10 of the 21 industries surveyed are in the expansion range, among which the PMI of agricultural and sideline food processing, food and beverages, refined tea, special equipment, automobiles, railways, ships, and aerospace equipment is higher than that of other industries. 52.0%, maintaining expansion for two consecutive months, and production and demand continued to recover. The PMI of high-energy-consuming industries such as textiles, petroleum, coal and other fuel processing, ferrous metal smelting and rolling processing continued to be in the contraction range, which was significantly lower than the overall level of the manufacturing industry, which was one of the main factors for the decline of PMI this month.
Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, told the 21st Century Business Herald that the continuous contraction of textile, fuel and ferrous metal smelting and processing industries is mainly due to weak demand and input cost pressure. The industry demand drive is not yet obvious. At the same time, the high temperature and rainy weather continued in July, the production and maintenance of enterprises increased, and the production and operation activities also slowed down. The high temperature weather in August will continue, and the recovery of demand remains to be seen.
According to Zhao Qinghe’s analysis, due to factors such as oil, coal, iron ore and other international commodity price fluctuations, the purchase price index and ex-factory price index of major raw materials were 40.4% and 40.1% respectively, down 11.6 and 6.2 percentage points from the previous month. Among them, the two price indices of ferrous metal smelting and rolling processing industry are the lowest among the surveyed industries, and the purchase price of raw materials and the ex-factory price of products have dropped significantly. Due to the sharp fluctuations in the price level, some companies have aggravated wait-and-see sentiment and weakened purchasing intentions. The purchasing volume index this month was 48.9%, down 2.2 percentage points from the previous month.
Wang Guoqing, director of the Lange Steel Research Center, pointed out in an interview with the 21st Century Business Herald that the price of raw materials that began to appear in the second quarter of this year dropped significantly. Although the cost of production enterprises has been reduced, it also means that the price support of finished products has weakened, and the superimposed demand side is skewed. Weakness, and the change in the attitude of commodity expectations, the loss degree of the steel industry is still very large.
Zhou Maohua believes that iron and steel, cement and other industries have a large investment in fixed assets, and they are used to diluting costs by expanding production capacity. However, in the current reality of weak demand, if production capacity is not controlled, it is likely to increase production and increase losses, aggravating enterprises. business difficulties.
Steady growth in the second half of the year requires vigilance against endogenous pressure
Wen Tao, an analyst at the China Federation of Logistics and Purchasing, believes that the current economic recovery and fluctuations are affected by certain short-term factors.
First, the cost pressure of enterprises has decreased, which is conducive to the recovery of enterprise benefits. Domestic commodity prices fell from high levels. The purchasing price index dropped sharply by 11.6 percentage points from the previous month to 40.4%, falling for 4 consecutive months and the downward trend accelerated. Judging from the enterprise survey, the proportion of enterprises reflecting high raw material costs also decreased by 7.9 percentage points from the previous month, a decline for 4 consecutive months. At the same time, with the dredging of the domestic industrial chain and supply chain, logistics costs have also declined. The proportion of companies reporting high logistics costs in July decreased by 5.1 percentage points from the previous month, declining for three consecutive months.
Second, the employment situation is basically stable, and the bottom line of people’s livelihood is better maintained. Despite the contraction in market supply and demand, the current employment remained relatively stable, with the employment index at 48.6%, a slight decrease of 0.1 percentage points from the previous month, and higher than the average value of the index in the first half of the year. The stable employment situation is not only conducive to the stable recovery of the economy in the future, but also better to protect the bottom line of people’s livelihood.
Third, the new kinetic energy maintained an upward momentum, and the industrial structure continued to be optimized. In July, the equipment manufacturing PMI and high-tech manufacturing PMI were 51.2% and 51.5%, respectively, down 1 and 1.3 percentage points from the previous month, and both remained in the expansion range of more than 51%. The sub-index shows that the growth rate of supply and demand in the equipment manufacturing industry and high-tech manufacturing industry has maintained a relatively good level, indicating that although the growth rate of new kinetic energy has slowed down, it is still on the rise, and the industrial structure continues to be optimized.
Zhang Liqun analyzed that the endogenous downward pressure has been revealed, and it generally has the characteristics of self-acceleration, which needs to be paid great attention. On the one hand, we must resolutely control all possible new impacts of the spread of the epidemic on the production and operation of enterprises. On the other hand, we must make every effort to increase the intensity of macro policies to deal with the triple pressure and significantly enhance the effect of the policies, so as to fully recover investment and consumer demand as soon as possible. Make concerted efforts to speed up the improvement of the production and operation conditions of enterprises, and strictly prevent and control the collapse of enterprises.
Zhong Zhengsheng, chief economist of Ping An Securities, told the 21st Century Business Herald that in the second half of the year, the domestic manufacturing industry must develop steadily, and terminal demand is crucial. Export trade was a bright spot supporting economic growth in the first half of the year, but uncertainty remains. We should be alert to the problem of shrinking external demand. Against the background of the world economic recession and the continuous adjustment of commodity prices, the decline in exports may have a greater impact on industries that are highly export-dependent such as computers, special equipment, and electrical machinery. In addition, it is necessary to further stabilize domestic demand by stabilizing the real estate market.
Zhou Maohua said that the current domestic supply shock problem has been alleviated as a whole, and the more precise domestic epidemic prevention policies and the gradual promotion of resumption of work and production have effectively stabilized and improved the expectations of entrepreneurs. In the current situation of weak demand, it is also necessary to pay more attention to the implementation of bailouts in terms of corporate capital flow, including fiscal policy credits and tax rebates, continued promotion of tax and fee reductions, and loan support at the monetary policy level.
The China Banking and Insurance Regulatory Commission has issued the “Notice on Further Promoting the High-quality Development of the Financial Services Manufacturing Industry” on July 11, requiring banking institutions to expand the scale of medium and long-term loans and credit loans in the manufacturing industry, focusing on supporting high-tech manufacturing and strategic emerging industries , to promote the development of advanced manufacturing clusters.
The meeting of the Political Bureau of the Central Committee held on July 28 also clarified the main tone of seeking progress while maintaining stability in the second half of the year, and proposed to actively expand demand, maintain the bottom line of security in all aspects, and deepen reform and opening up to enhance economic development momentum. At the same time, fiscal and monetary policies should effectively make up for the lack of social demand, especially the good and sufficient use of special bonds.
Wen Tao said that it is expected that with the continuous formation of physical workload in the second half of the year and the gradual subsidence of short-term factors, the economy will return to stable operation, and it is better to maintain a reasonable operating range.
Zhou Maohua also believes that the domestic manufacturing industry is still expected to return to the expansion area in the next few months. Through the stable growth policy to boost effective demand, the domestic large-scale infrastructure projects are expected to be launched at a faster pace, and the real estate market as a whole shows signs of stabilization and recovery. In the second half of the year, the order recovery of the industrial manufacturing industry played a significant driving role.
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